Correlation Between National CineMedia and Rocky Brands

Can any of the company-specific risk be diversified away by investing in both National CineMedia and Rocky Brands at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining National CineMedia and Rocky Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National CineMedia and Rocky Brands, you can compare the effects of market volatilities on National CineMedia and Rocky Brands and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in National CineMedia with a short position of Rocky Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of National CineMedia and Rocky Brands.

Diversification Opportunities for National CineMedia and Rocky Brands

0.23

Correlation Coefficient

National CineMedia  Rocky Brands

Modest diversification

The 3 months correlation between National and Rocky is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Rocky Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Brands and National CineMedia is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on National CineMedia are associated (or correlated) with Rocky Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Brands has no effect on the direction of National CineMedia i.e., National CineMedia and Rocky Brands go up and down completely randomly.

Pair Corralation between National CineMedia and Rocky Brands

Given the investment horizon of 90 days National CineMedia is expected to generate 3.16 times less return on investment than Rocky Brands. In addition to that, National CineMedia is 1.34 times more volatile than Rocky Brands. It trades about 0.06 of its total potential returns per unit of risk. Rocky Brands is currently generating about 0.24 per unit of volatility. If you would invest  2,339  in Rocky Brands on October 26, 2024 and sell it today you would earn a total of  228.50  from holding Rocky Brands or generate 9.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

National CineMedia  vs.  Rocky Brands

National CineMedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National CineMedia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, National CineMedia is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Rocky Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Rocky Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with National CineMedia and Rocky Brands

The main advantage of trading using opposite National CineMedia and Rocky Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National CineMedia position performs unexpectedly, Rocky Brands can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Rocky Brands will offset losses from the drop in Rocky Brands' long position.

The idea behind National CineMedia and Rocky Brands pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.